Remedies available to an aggrieved party for breach of contract.
State the principles for awarding and the rules laid down by the Indian Contract Act for assessing damages on breach of contract. Ans. When a contract is not performed, it is called the breach of contract. A breach of contract discharges the promisee from his obligation of performing it. At the same time, the law provides certain remedies to the injured party (promisee) against the promiser or the party at default to enforce his rights under the contract. An injured or aggrieved party has one or more of the following remedies :
1. Rescission of the contract.
2. Suit for specific performance.
3. Suit for injunction.
4. Suit upon quantum meruit.
5. Suit for damages.
1. Rescission of the Contract: When there is breach of contract by one party, the other party may rescind the contract and need not perform his part of obligation under the contract and may sit quietly at home, if he decides not to take any legal action against the guilty party. But in case the aggrieved party intends to sue the guilty party for damages for breach of contract, he has to file a suit for rescission of the contract. The aggrieved party will be free from all obligations under the contract as soon as the court grants rescission.
Illustration : 'A' contracts to supply 100 kgs. of tea leaves for Rs. 8,000/-to 'B' on April 15. If 'A' does not supply tea leaves on that day, 'B' need not pay the price. 'B' may treat the contract as rescinded and sit quietly. He can also file a suit for rescission of the contract and claim for damages.
2. Suit for specific performance : By specific performance. the Court directs the party committing breach of contract to perform the promise in accordance with the terms of the contract, specific performance of the contract can be granted under the Specific Relief Act. In simple words, specific performance means, the performance of the contract as per the terms of the contract. But it is not granted in the following cases:
(i) Where monetary compensation is an adequate relief. As such the courts refuse specific performance of a contract to lend or borrow money.
(ii) Where the court cannot supervise the actual execution of the contract. For example a building construction contract.
(iii) Where the contract is of personal services, for example a contract to marry or to paint a picture etc.
In such contracts 'injunction' is granted place of specific performance. Injunction means an order which forbids the defendant to perform a like personal service for other persons.
3. Suit for an Injunction: 'Injunction' is an order of the court restraining a person from doing a particular act. It is a mode of securing the specific performance of the negative terms of the contract. In other words, where a party is in breach of negative term of the contract (if he is doing something which he promised not to do), the court may be issuing an injunction order, restrain him from doing what he promised not do do. Thus, it is a preventive relief which is particularly appropriate in cases of anticipatory breach of contract where damages would not be an adequate relief.
Illustration: 'A' agreed to sing at 'B's theatre for three months from April 1, and not to sing for no one else during that period. Subsequently she contracted to sing at 'C's theatre and refused at 'B's theatre. On a suit filed by 'B', the court refused to order for specific performance of her positive engagement to sing at the plaintiff's theatre, but granted an injunction restraining 'A' from singing elsewhere and awarded damages to 'B' to compensate him for the loss caused by 'A's refusal.
4. Suit for 'Quantum Meruit' : The phrase 'Quantum Meruit' literally means "as much as is earned" or "in proportion to the work done". This is a remedy available to an injured party for the breach of contract against the guilty party to file of suit for "quantum meruit". It is a right to sue which arises where after part performance of the contract by one party, there is a breach of contract or the contract becomes void. This remedy may be availed of either without claiming for damages (.e. reasonable compensation for work done) or in addition to claiming damages for the remaining unperformed part. The aggrieved party may file a suit upon 'quantum meruit' and may claim payment in proportion to work done or goods supplied in the undermentioned cases:
(1) Where work has been done in accordance with the contract, which is discharged by the default of the defendant.
Illustration: 'A' engages 'B', a contractor, to build a three storied house. After a part is constructed 'A' prevents 'B' from working any move. The contractor 'B' is entitled to get reasonable compensation for the work done under the doctrine of quantum meruit in addition to the damages for the breach of the contract. (ii) Where work has been done according to contract which becomes void provided the contract is divisible.
Illustration: 'C' was appointed as managing director of a company by the board of directors under a written contract providing him remuneration. The contract was found to be void because the directors who constituted the 'Board' were not qualified to make appointment. 'C' rendered services to the company. He filed a suit for the sums specified in the agreement on a quantum meruit.
5. Suit for damages for the loss sustained: In case of a breach of contract, the injured party can claim damages for the loss caused by breach of contract. Damages are given by way of restitution and as a monetary compensation to the injured party can recover the actual loss caused to him by the breach of contract and not the exemplary or unusual damages. Exemplary damages can be recovered in case of a breach of promise of marriage where the courts have regard to the feelings of the aggrieved party. The injured party is placed in same financial position as he would have been, if the contract would have been performed. Thus the damages are given by way of compensation for the loss suffered by the plaintiff and not for the purpose of punishing the defendant for the breach of contract.
Types of damages: The following are different types of damages which can be claimed in various situations :
1. Compensatory damages: These damages are calculated to compensate or make up the loss suffered by the party.
2. Nominal damages: When breach of contract is committed in the usual course of things, the nominal damages may be allowed. These damages arise from all the reasonably forseable consequences of the breach. It is the discretion of the court whether to allow or refuse these damages.
3. Exemplary damages: These damages are granted for injured feelings like mental pain, suffering etc. where courts take into account the feelings of the aggrieved party, exemplary damages may be ordered.
4. Special damages: These damages arise on account of unusual circumstances. These damages are granted when the parties knew at the time of entering contract that the special loss or damage would result or likely to result from the breach of contract. This is in the form of additional loss. These are recoverable only when they are brought to the knowledge of the defendant.
Rules or Principles as to payment of damages : The law governing the payment of damages is based on the leading English case of Hadley Vs. Baxandale which has been incorporated in Section 73 of the Indian Contract Act. On analysing this Section, it shows that on breach of the contract, the party who suffers by such breach is entitled to receive compensation according to the following principles:
(1) The damages are awarded by way of compensation for the loss suffered by the aggrieved party and not for punishing the guilty party for the breach.
(2) The injured-party is to be placed in the same position, so far as money can do, as if the contract had been performed.
(3) The aggrieved party can recover by way of compensation only the actual loss suffered by him from the breach.
(4) Special damages are usually not allowed until they are in the knowledge of both the parties at the time of entering the contract.
(5) The fact that damages are difficult to assess does not prevent the injured party from recovering the same.
(6) When no real loss arises from the breach of the contract, only nominal damages are awarded.
(7) Where the parties fix up in advance the sum payable as damages in case of breach of contract, the court will allow only reasonable compensation so as to cover the actual loss sustained but not more than mentioned in the contract.
(8) Exemplary damages cannot be awarded for breach of contract except in case of breach of marriage contracts or wrongful refusal by the bank to honour customer's cheque of injured party to minimise the damages.
(9) It is the duty of injured party to minimise the damages suffered.
(10) The injured party is entitled to get the costs of getting the decree for damages from the defaulter party.
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